Hold UPL; target of Rs 650: Prabhudas Lilladher

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Prabhudas Lilladher's research report on UPL

We trim our FY24E/25E estimates by 10%/7% and cut target multiple from 12x earlier to 10x currently and downgrade the rating to ‘Hold’ from Buy, to factor in subdued growth and margin outlook in the near term primarily led by a) high inventory levels in key regions; b) adverse weather conditions impacting demand; and c) falling RM cost scenario exerting pressure on realizations & margins. UPL reported weak set of numbers below our and consensus estimates with Revenue/EBITDA/PAT of Rs89.6bn/Rs15.9bn/ Rs2.0bn (-17%/- 32%/-79%YoY). Citing bleak demand environment globally coupled with pressure on realizations & margins, UPL has revised downward its revenue growth guidance to +1-5% (earlier +6-10%) and +3-7% for EBITDA growth (earlier +8-12%) in FY24E.

Outlook

Management has not provided debt repayment guidance for FY24, stating net debt/EBITDA to be in the range of 1.5-2.0x in FY24E. We expect Revenue/PAT CAGR of 4%/15% over FY23-25E. Downgrade to ‘Hold’ from Buy with revised TP of INR650 (earlier Rs850) based on 10X FY25E EPS.

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UPL - 01 -08 - 2023 - prabhu